Meet Alphabet's Guru of Googley Rigor

My conversation with Ruth Porat, chief financial officer of Alphabet and its money-gushing subsidiary Google, begins, as chats so often do, at the company’s Mountain View, Calif., “Googleplex” headquarters, with food. I have food on my brain because some fine Indian fare from Charlie’s Café, the main eatery there, is in my stomach, having just come from lunch. It is the first day of November, the week after Alphabet reported a third-quarter profit of $6.7 billion on revenues of $27.8 billion that grew at a blistering 24% pace, and I’m keen to find out from Porat if the company ever will stop giving its employees so much free food.

Porat, known inside Alphabet for her fierce attention to controlling costs, doesn’t flinch in her defense of the company’s touchy-feely legacy. The all-free micro kitchens and food trucks and cafeterias, she says, are “a core part of the work experience. We’ve looked at it, and we think it’s a really smart way to run the business. Our view is if we have people staying on site, hanging out together, the return on that is terrific.”

Ruth Porat has instilled financial discipline at Alphabet while keeping oodles of perks.

Weinberg-Clark Photography

This all-together-now spirit blended with financial and analytical rigor is all rather Googley, a quality Porat, who joined the company two years ago, earnestly embraces. A longtime investment banker with Morgan Stanley and ultimately the firm’s CFO, Porat is the current steward of the unique culture that cofounders Larry Page and Sergey Brin established for their grad-school-like enterprise that now employs more than 78,000 globally. (They eat 178,000 meals daily, by the way.) Not merely the finance chief, Porat also oversees the company’s “real estate and workplace services” group, which means she’s in charge of the buildings and all those famous perks. The company’s facilities around the world have a high standard, she says. They need to be “fun” and “whimsical” and to enable collaboration.

As a new Googler, Porat spent some time learning the words that describe the Googley people who work in those buildings. “It’s inquisitive, risk taker, curiosity, excitement, fun, collaborative, teamwork,” she says. “We want people who are really bright, really inquisitive, really passionate, who want to make a big difference.”

Yet the signal contribution of Porat, a Silicon Valley native who turned 60 this year, has nothing to do with whimsy. Months after joining Google, she led the initiative that seemed like a joke when it was announced. Alphabet would be a holding company to house its wackier or noncore efforts—like its Verily life sciences, Waymo self-driving cars, and Loon Internet balloon projects—while Google’s ­advertising-oriented business would stand apart and continue to drive the company’s finances.

The financial engineering had the immediate effect of demonstrating two things to investors: Google was minting even more money than they thought, and the “other bets” weren’t losing as much as they feared. Before the split, Porat recalls, “research analysts were coming out with their range of estimates as to how big the operating loss would be in ‘other bets.’ At the high end it was $10, $11 billion. The reality was that the operating loss was around $3.5 billion that first year. And I think that what that said is we have a portfolio of businesses we’re investing in, and it’s a really reasonably sized portfolio.”

Nicolas Rapp

Those losses have continued apace, totaling $812 million in the most recent quarter. Porat has overseen some painful cuts. “One of the key elements is being granular about resources required to support any particular area,” she says, including making decisions to “invest, disinvest, or slow things down.” The company is tempering its investment in the costly Fiber high-speed Internet and TV service, for example. And earlier this year, Google shed its Terra Bella satellite imaging business. “Our conclusion was that we don’t need to own this asset,” says Porat. “We’d rather have our resources put into other areas. Somebody else can own it; we can be a customer.”

Porat has enforced new discipline on what remains too. One radical change involved accounting: Leaders were required to factor in the cost of employee stock options and other equity compensation for their routine budgeting. It’s a break from Internet-industry norms that is intended to provide managers with a more realistic picture of their spending.

Ruth Porat, Alphabet's financial ace.

Another shift was to require clear financial planning companywide. “I want milestones,” Porat says, like the expected number of users of individual products. “I want to know in six months when we’re sitting down with the midyear plan, what would you like to have achieved?” Her philosophy, she says emphatically, is that “everybody has to have a plan against which they’re executing.”

To say that Alphabet’s finances are secure is an understatement. The company is worth more than $700 billion, and its cash reserves are a cool $100 billion. And the core Google operation has two legitimate high-growth areas: YouTube and a nascent cloud-computing business, which competes with Amazon Web Services and Microsoft Azure.

Porat is among a handful of top people who work for both Alphabet and Google. As such, there’s a regular cadence to her week. Monday is Google day, she says, spent in meetings with Google CEO Sundar Pichai and other top leaders. Tuesday is devoted to other bets, meaning extensive face time with Page and Brin as well as former Google CEO Eric Schmidt, now Alphabet’s executive chairman. Friday she spends with her finance team. “But the way we operate is, you sort of live in a Chromebook, and you just pop down in a huddle,” Google lingo for a small conference room. And no matter what, a good meal is just around the corner.

Correction (Nov. 22, 2017): The original version of this article mistakenly said Alphabet’s human resources group is part of its “real estate and workplace services” organization. It is a standalone organization. The article has been updated.

A version of this article appears in the Dec. 1, 2017 issue of Fortune with the headline “Alphabet’s Guru of Googley Rigor.”

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